'Wait-and-see' effect not always caused by economic uncertainty, research shows

Aug 02, 2010
'Wait-and-see' effect not always caused by economic uncertainty, research shows

(PhysOrg.com) -- Business uncertainty leads to quick drops in economic activity, according to a long-held belief in economics. New research from the University of Notre Dame casts doubt on that assumption.

Published recently by the National Bureau of Research, research by Notre Dame economist Eric Sims and colleagues from the University of Michigan and the University of Munich found no evidence that increases in uncertainty cause a wait-and-see effect, or slowing of .

“We wanted to tackle the question of whether surprise increases in business uncertainty lead to large and quick drops in economic activity,” Sims says.

“Our main finding is that increases in business uncertainty are associated with prolonged declines in economic activity, but that it takes a long time to play out. Uncertainty seems to be more of a consequence of recessions, not a cause of recessions,” Sims says.

One of the implications of this research is the message to policy makers that talking about the need to end makes no difference; instead, only an increased demand will have an .

A member of the Notre Dame faculty since 2009, Sims specializes in macroeconomics.

Explore further: Study finds Illinois is most critical hub in food distribution network

add to favorites email to friend print save as pdf

Related Stories

Explained: Knightian uncertainty

Jun 02, 2010

The global economic crisis of the last two years has stemmed, in part, from the inability of financial institutions to effectively judge the riskiness of their investments. For this reason, the crisis has ...

New study examines how cost affects decisions to marry

Aug 03, 2009

(PhysOrg.com) -- "Money can’t buy me love," the Beatles famously sang. And now a new paper by University of Notre Dame economist Kasey S. Buckles and colleagues suggests money, or more precisely the price of marriage, can ...

Not sure? Don't sweat it: Embrace Uncertainty

May 07, 2008

Governments and other large organisations should put more resources into ways of dealing with the unknown, according to experts pioneering a new approach to understanding and managing uncertainty.

Recommended for you

Digging up the 'Spanish Vikings'

Dec 19, 2014

The fearsome reputation of the Vikings has made them the subject of countless exhibitions, books and films - however, surprisingly little is known about their more southerly exploits in Spain.

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.